Thousands of the brightest children in England are failing to achieve top grades at GCSE because of a growing trend of entering pupils early for the examination, according to figures released by the education watchdog.

Sir Michael Wilshaw, Ofsted chief inspector, warned he will be critical of schools that use early entry for GCSE if they are not absolutely confident pupils will achieve their full potential.

His message comes after Ofsted statistics showed an "explosion" in early entries for maths and English at GCSE over the past six years, with around a third of all pupils – more than 200,000 in each subject – now entered early for these exams.

Ofsted's figures showed that among pupils who were the highest achievers at primary school – reaching level 5 in Sats exams – and who took the exam early, 12% fewer were awarded A grades in English and 11% fewer achieved that level in maths in 2011, compared to those who were not entered early.

"We think early entry hurts the chances of the most able children getting the top grades of A*, A and B, which they need to progress to A-level and certainly to university," Wilshaw said."We will be critical of schools using early entry except where they are absolutely confident that youngsters are reaching their full potential.

"By full potential we mean A* and A actually if they are bright youngsters."

Sir Michael added that even when pupils achieved those top grades early Ofsted expected them to continue studying the core subjects of English, maths and science into Year 11 rather than being diverted to other subjects.

He said about 20% of children who leave primary school with level 5 do not achieve the top grades at GCSE of A*, A and B as a result of a combination of factors including early entry at GCSE.

Other factors included low expectations in schools of pupils, a failure to track the progress of pupils and what Sir Michael termed "the curse of mixed ability classes without mixed ability teaching."

"This is not a judgment on mixed ability as opposed to setting or streaming, it is saying where there are mixed ability classes unless there is differentiated teaching to groups of school children in the class, unless there are individual programmes of work, it doesn't work," he said,

"It is absolutely critical that if you have a youngster with low grades at school who struggles with literacy and numeracy sitting alongside a youngster with Oxbridge potential then it is really important that is taken into account and they are taught by people who are experienced in good teaching of mixed ability classes."

Sir Michael's remarks were made as Ofsted unveiled the report Getting to Good examining the steps taken by headteachers in schools that have improved from satisfactory to good or better. A second report on the impact of early entry for GCSE is due to be published at a later date by Ofsted.

Ofsted has warned schools that from the start of this academic year, "good" is the minimum standard that will be expected of them, with the "satisfactory" rating used by inspectors scrapped in favour of "requires improvement".

Sir Michael said leadership was the key issue in improving schools: "If we are going to be a country which is competitive economically and competitive with the rest of the world and a country which is socially cohesive we have got to have more schools getting to good and particularly those schools in poorer areas," he said.

A Department for Education spokesman said: "It's unacceptable that children from disadvantaged backgrounds are less likely to do well in school than their peers. The coalition Government has introduced the pupil premium to tackle this problem. "We have given schools the freedom to use the additional funding in innovative ways. However, it is vital they use it to boost results for the most disadvantaged pupils, drawing on the large amount of evidence on how to make the biggest difference.

"The pupil premium has only been in place for one year, but we welcome this early report by Ofsted and their recommendation that schools need to use the premium properly. We believe that Ofsted's focus on the pupil premium will cause schools to dramatically improve the ways they use this very large amount of money. By protecting schools' budgets we have made sure that the pupil premium – which will be worth £2.5bn by 2014-15 – is additional money for schools."